EXHIBIT 10.1
ANNALY MORTGAGE MANAGEMENT, INC.
3,600,000 Shares
Common Stock
PURCHASE AGREEMENT
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February 12, 1997
FRIEDMAN, BILLINGS, ▇▇▇▇▇▇ & CO., INC.
Potomac Tower
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
Annaly Mortgage Management, Inc., a Maryland corporation (the
"Company"), proposes to issue and sell to you (the "Initial Purchaser"),
3,600,000 shares (the "Shares"), of its common stock par value $.01 per share
("Common Stock"). The sale of Shares to you will be made without registration of
the Shares under the Securities Act of 1933, as amended (the "Act"), in reliance
upon the exemption from the registration requirements of the Act provided by
Section 4(2) thereof. You have advised the Company that you will make an
offering of the Shares purchased by you hereunder in accordance with Section 4
hereof on the terms set forth in the Final Memorandum (as defined below), as
soon as you deem advisable after this Agreement has been executed and delivered.
In connection with the sale of the Shares, the Company has prepared a
preliminary offering memorandum, dated January 27, 1997 (the "Preliminary
Memorandum"), and a final offering memorandum, dated February 12, 1997 (the
"Final Memorandum"). Each of the Preliminary Memorandum and the Final
Memorandum sets forth certain information concerning the Company and the Shares.
The Company hereby confirms that it has authorized the use of the Preliminary
Memorandum and the Final Memorandum in connection with the offering and resale
by the Initial Purchaser of the Shares. Any references herein to the
Preliminary Memorandum or the Final Memorandum shall be deemed to include all
exhibits thereto.
The holders of the Shares will be entitled to the benefits of a
Registration Rights Agreement dated the date hereof between the Company and the
Initial Purchaser (the "Registration Rights Agreement").
1. Representations and Warranties.
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(a) The Company represents and warrants to, and agrees with, the
Initial Purchaser as set forth below in this Section 1.
(i) Each of the Preliminary Memorandum and the Final Memorandum
as of its date did not, and the Final Memorandum as of the Closing
Date will not, contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; provided, that the foregoing shall not apply to
statements or omissions made in reliance upon, and in conformity with,
written information furnished to the Company by you specifically for
use in the preparation thereof.
(ii) Neither the Company nor any affiliate (as defined in Rule
501(b) of Regulation D under the Act ("Regulation D")) of the Company
has directly, or through any agent, (i) sold, offered for sale,
solicited offers to buy or otherwise negotiated in respect of, any
security (as defined in the Act) which is or will be integrated with
the sale of the Shares in a manner that would require the registration
of the Shares under the Act or (ii) engaged in any form of general
solicitation or general advertising (within the meaning of Regulation
D) in connection with the offering of the Shares. For purposes of
this Agreement, the Initial Purchaser shall not be considered an
affiliate of the Company.
(iii) It is not necessary in connection with the offer, sale and
delivery of the Shares in the manner contemplated by this Agreement
and the Final Memorandum to register the Shares under the Act except
as contemplated by the Registration Rights Agreement.
(iv) None of the Company, its affiliates or any person acting on
behalf of the Company or its affiliates has engaged in any directed
selling efforts (as that term is defined in Regulation S under the Act
("Regulation S")) with respect to the Shares, and the Company and its
affiliates and any person acting on its or their behalf have complied
with the offering restrictions requirement of Regulation S.
(v) The Shares satisfy the requirements set forth in Rule
144A(d)(3) under the Act. The Company has been advised by the
National Association of Securities Dealers, Inc. PORTAL Market that
the Shares have or will be designated PORTAL eligible securities in
accordance with the rules and regulations of the National Association
of Securities Dealers, Inc.
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(vi) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State
of Maryland and is duly qualified to transact business as a foreign
corporation and is in good standing under the laws of all other
jurisdictions where the ownership or leasing of its properties or the
conduct of its business requires such qualification, except where the
failure to be so qualified does not or would not result in a material
adverse change in the condition (financial or otherwise), management,
business, prospects, net worth or results of operations of the Company
(a "Material Adverse Effect").
(vii) The Company has full power (corporate and other) to own or
lease its properties and conduct its business as described in the
Final Memorandum; and the Company has full power (corporate and other)
to enter into this Agreement and the Registration Rights Agreement and
to carry out all the terms and provisions hereof and thereof to be
carried out by it.
(viii) The Company has no subsidiaries and does not own,
directly or indirectly, any shares of stock or other equity securities
of any corporations or any equity interest in any firm, partnership,
joint venture, association or other entity.
(ix) The Company has an authorized, issued and outstanding
capitalization as set forth in the Final Memorandum. All of the
issued shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and nonassessable.
The Shares been duly authorized and at the Closing Date, after payment
therefor in accordance herewith, will be validly issued, fully paid
and nonassessable. At the Closing Date, no holders of outstanding
shares of capital stock of the Company will be entitled to any
preemptive or other rights to subscribe for any of the Shares, and no
holder of securities of the Company has any right to require the
Company to register the offer or sale of any securities owned by such
holder under the Act other than pursuant to the Registration Rights
Agreement.
(x) The capital stock of the Company conforms to the
description thereof contained in the Final Memorandum.
(xi) Except as disclosed in the Final Memorandum, there are no
outstanding (A) securities or obligations of the Company convertible
into or exchangeable for any capital stock of the Company, (B)
warrants, rights or options to subscribe for or purchase from the
Company any such capital stock or any such convertible or
exchangeable securities or obligations, or (C) obligations of the
Company to issue any shares of capital stock, any such convertible or
exchangeable securities or obligations, or any such warrants, rights
or options, and the description of the Company's stock option, stock
bonus and other stock plans or arrangements and the options or other
rights granted and exercised thereunder, set forth in the Final
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Memorandum accurately and fairly presents in all material respects the
information required to be shown with respect to such plans,
arrangements, options and rights.
(xii) The financial statements and schedules of the Company
included in the Final Memorandum fairly present in all material
respects the financial position of the Company as of the date therein
specified. Such financial statements and schedules have been prepared
in accordance with generally accepted accounting principles ("GAAP")
consistently applied throughout the periods involved.
(xiii) Deloitte & Touche LLP, who have audited certain financial
statements of the Company and delivered their report with respect to
the audited financial statements included in the Final Memorandum, are
independent public accountants within the meaning of Rule 101 of the
AICPA's Code of Professional Conduct.
(xiv) The execution and delivery of this Agreement and the
Registration Rights Agreement have been duly authorized by the Company
and this Agreement and the Registration Rights Agreement have been
duly executed and delivered by the Company, and each is the valid and
binding agreement of the Company, enforceable against the Company in
accordance with its respective terms, except as such enforceability
may be limited by the effect of bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to rights
and remedies of creditors or by general equitable principles.
(xv) No legal or governmental proceedings are pending to which
the Company is a party or to which the property of the Company is
subject and no such proceedings have been threatened against the
Company or with respect to any of its properties.
(xvi) No consent, approval, authorization, registration,
qualification or order of or with any court or governmental agency
or body is required to be obtained by the Company for the issue or
sale of the Shares or for the consummation of any other of the
transactions herein contemplated or for the fulfillment of the terms
of this Agreement herein or in the Registration Rights Agreement
except the registration statement pursuant to the Registration Rights
Agreement which, in accordance with the terms thereof, must be
declared effective by the Commission, and such as have been obtained
and such as may be required under the blue sky laws of any
jurisdiction.
(xvii) Neither the issue or sale of the Shares, nor the
consummation of any other of the transactions contemplated herein or
in the Registration Rights Agreement nor the fulfillment of the terms
hereof or thereof, will conflict with, result in a breach or violation
of, or constitute a default under, any law or regulation or the
articles of incorporation or by-laws of the Company or the terms of
any indenture, credit
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agreement, mortgage, deed of trust, lease or other agreement or
instrument to which the Company is a party or by which the Company or
any of its properties is bound, or any statute or any judgment, order,
decree, rule or regulation of any court, regulatory body,
administrative agency, governmental body or arbitrator having
jurisdiction over the Company.
(xviii) Subsequent to the respective dates as of which
information is given in the Final Memorandum, and except as described
in or specifically contemplated by the Final Memorandum, (i) the
Company has not incurred any material liabilities or obligations,
direct or indirect, or entered into any material verbal or written
agreement or other transaction which is not in the ordinary course of
business or which could result in a material reduction in the future
earnings of the Company; (ii) the Company has not sustained any
material loss or interference with its business or properties from
fire, flood, hurricane, accident or other calamity, whether or not
covered by insurance, or from any labor dispute or any legal or
governmental proceeding; (iii) the Company has not paid or declared
any dividends or other distributions with respect to its capital
stock, and the Company is not in default in the payment of principal
or interest on any outstanding debt obligations; (iv) there has not
been any change in the capital stock (other than the sale of the
Shares hereunder), or indebtedness material to the Company (other than
in the ordinary course of business); and (v) there has not been any
event, circumstance, or development that results in, or that the
Company believes would result in, a Material Adverse Effect, except in
each case as described in or contemplated by the Final Memorandum.
(xix) Neither the Company nor any employee of the Company has
made any payment of funds of the Company prohibited by law and no
funds of the Company have been set aside to be used for any payment
prohibited by law.
(xx) (a) The Company possesses all certificates, authorizations
and permits issued by the appropriate federal, state or foreign
regulatory authorities material to the conduct its business, all of
which are valid and in full force and effect, and (b) the Company has
not received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit.
(xxi) The Company is not in violation of any provision of its
articles of incorporation or bylaws.
(xxii) The Company is conducting business in compliance with all
applicable laws, rules and regulations of the jurisdictions in which
it is conducting business, including without limitation, all
applicable local, state and federal environmental laws and
regulations, except where the failure to be in compliance would not
have a Material Adverse Effect.
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(xxiii) The Company is not an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in
the Investment Company Act of 1940, as amended (the "1940 Act"), and
this transaction will not cause the Company to become an "investment
company" or an entity "controlled" by an "investment company" under
the 1940 Act.
(xxiv) The Company has filed all necessary foreign, federal,
state and local tax returns that are required to be filed on or before
the date hereof and has paid all taxes required to be paid by it and
any other assessment, fine or penalty levied against it and required
to be paid on or before the date hereof; and the Company has no
knowledge of any tax deficiency which has been or might be asserted or
threatened against the Company which could have a Material Adverse
Effect.
(xxv) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (A)
transactions are executed in accordance with management's general or
specific authorizations; (B) transactions are recorded as necessary to
permit preparation of financial statements in conformity with GAAP and
to maintain asset accountability; (C) access to assets is permitted
only in accordance with management's general or specific
authorization; and (D) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(xxvi) No default exists, and no event has occurred that, with
notice or lapse of time or both, would constitute a default, in the
due performance and observance of any term, covenant or condition of
any indenture, mortgage, deed of trust, lease or other agreement or
instrument to which the Company is a party or by which the Company or
any of its properties is bound or may be affected, in any respect that
would have a Material Adverse Effect.
(xxvii) The Company owns no real property. The Company has good
and marketable title to all the properties and assets owned by it, in
each case free and clear of any security interests, liens,
encumbrances, equities, claims and other defects, except such as do
not have a Material Adverse Effect and do not interfere with the use
made or proposed to be made of such property by the Company, and
except as described in or contemplated by the Final Memorandum. The
Company holds its leased properties under valid, subsisting and
enforceable leases, with such exceptions as are not materially
significant to the business of the Company.
(xxviii) No labor dispute with the employees of the Company
exists or, to the Company's knowledge, is threatened or imminent that
could result in a Material Adverse Effect.
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(xxix) The Company owns or possesses, or can acquire on
reasonable terms, all necessary trademarks, service marks, trade
names, licenses, patents, copyrights and proprietary or other
confidential information to conduct its business as now conducted or
as proposed to be conducted; and the Company has not received any
notice of infringement of or conflict with asserted rights of any
third party with respect to any of the foregoing which, singly or in
the aggregate, if the subject of an unfavorable decision, ruling or
finding, would have a Material Adverse Effect.
(xxx) The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as
are prudent and customary in the business in which it is engaged; and
the Company has no reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or
to obtain similar coverage from similar insurers as may be necessary
to continue its business at a cost that would not have a Material
Adverse Effect.
(xxxi) Neither the Company nor any of its officers, directors,
employees or stockholders have incurred any liability for a fee,
commission or other compensation on account of the employment of a
broker or finder in connection with the transactions contemplated by
this Agreement other than the discount and fees to be received by the
Initial Purchaser.
(xxxii) As of the Closing Date, the Company will be organized
and intends to operate in a manner so as to qualify as a "real estate
investment trust" ("REIT") under Sections 856 through 860 of the
Internal Revenue Code of 1986, as amended (the "Code"), and will elect
to, will use its best efforts to and intends to remain qualified to,
be taxed as a REIT under the Code and pursuant to any applicable state
tax laws. The Company does not know of any event which would cause or
is likely to cause the Company to fail to qualify as a REIT at any
time.
(xxxiii) The description set forth under the heading "ERISA
Considerations" is true and correct in all material respects.
(b) Any certificate signed by any officer of the Company or any of its
affiliates and delivered to the Initial Purchaser or its counsel shall be deemed
a representation and warranty by the Company to the Initial Purchaser as to the
matters covered thereby.
2. Purchase and Sale. Subject to the terms and conditions and in reliance
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upon the representations and warranties herein set forth, the Company agrees to
sell to the Initial Purchaser, and the Initial Purchaser agrees to purchase from
the Company, 3,600,000 shares of Common Stock at a price per share of $9.30
which is equal to the initial offering price of $10.00 per Share less the
discount to the Initial Purchaser of $.70 per Share.
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3. Delivery and Payment. Certificates for the Shares shall be registered
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in such names and in such denominations (subject to any ownership restrictions)
as the Initial Purchaser requests upon notice to the Company at least two days
prior to the Closing Date and shall be delivered by or on behalf of the Company
to the Initial Purchaser, against payment by or on behalf of the Initial
Purchaser of the aggregate purchase price therefor by wire transfer of same-day
funds. Such delivery of and payment for the Shares shall be made at the offices
of ▇▇▇▇▇▇▇ & ▇▇▇▇▇ L.L.P., ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇, at 10:00 a.m., eastern time, on February 18, 1997, or at such other
place, time or date as the Initial Purchaser and the Company may agree upon,
such time and date of delivery against payment being herein referred to as the
"Closing Date." The Company will make such certificates for the Shares
available for checking and packaging by the Initial Purchaser at least 24 hours
prior to the Closing Date.
4. Offering of Shares; Restrictions on Transfer.
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(a) The Initial Purchaser represents and warrants to and agrees with
the Company that (i) it has not solicited and will not solicit any offer to buy
or offer to sell the Shares by means of any form of general solicitation or
general advertising (within the meaning of Regulation D) with respect to Shares
sold in reliance on Regulation S, by means of any directed selling efforts and
(ii) it has solicited and will solicit offers to buy the Shares only from, and
has offered and will offer, sell to or deliver the Shares only to, (A) persons
who it reasonably believes to be qualified institutional buyers (as defined in
Rule 144A under the Act) or, if any such person is buying for one or more
institutional accounts for which such person is acting as fiduciary or agent,
only when such person has represented to it that each such account is a
qualified institutional buyer to whom notice has been given that such sale or
delivery is being made in reliance on Rule 144A, and, in each case, in
transactions under Rule 144A and who provide to it a certificate in the form of
Exhibit A hereto, (B) persons who it reasonably believes to be institutional
"accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) of
Regulation D), and who provide to it a letter in the form of Exhibit B hereto or
(C) persons to whom, and under circumstances which, it reasonably believes
offers and sales of Shares may be made without registration of the Shares under
the Act in reliance upon Regulation S thereunder, and who provide to it a letter
in the form of Exhibit C hereto. The Initial Purchaser also represents and
warrants and agrees that it has offered and will offer to sell the Shares only
to, and has solicited and will solicit offers to buy the Shares only from,
persons that in purchasing such Shares will be deemed to have represented and
agreed as provided under "Notice to Investors" in Exhibit D hereto. The Initial
Purchaser represents and warrants that it is familiar with the rules and
restrictions set forth in Regulation S and that it has not undertaken any
activity for the purpose of, or that could reasonably be expected to have the
effect of, conditioning the market for any Shares being offered in reliance on
Regulation S. The Initial Purchaser further represents and warrants that, in
the case of any sale of Shares to a distributor, a dealer (as defined in Section
2(12) of the Securities Act) or a person receiving a selling concession, fee or
other remuneration, prior to the expiration of the one-year restricted period
set forth in Rule 903(c)(3)(iii) of Regulation S, it will send a confirmation or
other notice to the purchaser stating that the purchaser is subject to the same
restrictions on offers and sales that apply to a distributor.
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(b) The Purchaser represents and warrants that (i) it has not offered
or sold and will not offer or sell any Shares to persons in the United Kingdom
prior to the expiration of the period six months from the date of their
issuance, except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which have not and
will not result in an offer to the public in the United Kingdom within the
meaning of the Public Offers of Securities Regulations 1995 or the Financial
Services ▇▇▇ ▇▇▇▇; (ii) it has complied and will comply with all applicable
provisions of the Financial Services ▇▇▇ ▇▇▇▇ with respect to anything done by
it in relation to the Shares in, from or otherwise involving the United Kingdom;
and (iii) it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the issue of the
Shares to a person who is of a kind described in Article 11(3) of the Financial
Services ▇▇▇ ▇▇▇▇ (Investment Advertisements) (Exemptions) Order 1995 or is a
person to whom the document may otherwise lawfully be issued or passed on.
(c) The Initial Purchaser understands that the Company and, for the
purposes of the opinions to be delivered to the Initial Purchaser pursuant to
Section 7 hereof, counsel to the Company and counsel to the Initial Purchaser
will rely upon the accuracy and the truth of the forgoing representations and
Initial Purchaser hereby consents to such reliance.
5. Covenants of the Company. The Company covenants and agrees with the
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Initial Purchaser that:
(a) The Company will furnish to the Initial Purchaser, without charge,
such copies of the Final Memorandum and any supplements or amendments thereof as
the Initial Purchaser may reasonably request.
(b) The Company will cooperate with the Initial Purchaser and its
counsel in arranging for the qualification or registration of the Shares for
offering and sale under, or establishing an exemption from such qualification or
registration under, the securities or blue sky laws of such jurisdictions as
the Initial Purchaser may designate.
(c) If, at any time prior to the completion of the sale of the Shares
by the Initial Purchaser as determined by the Initial Purchaser, (i) any event
occurs as a result of which the Final Memorandum, as then amended or
supplemented, would include any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or if for
any other reason it is necessary at any time to amend or supplement the Final
Memorandum to comply with the Act or the rules or regulations of the Commission
thereunder, or (ii) the Company receives any notification with respect to the
modification, rescission, withdrawal or suspension of the qualification or
registration of the Shares, or any exemption from such registration or
qualification, in any jurisdiction, the Company will promptly notify the Initial
Purchaser thereof and will prepare, at the Company's expense, an amendment or
supplement to the Final Memorandum that corrects such statement or omission or
effects such compliance. The Company will use its best efforts to prevent
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the issuance of any such modification, rescission, withdrawal or suspension and,
if any such modification, rescission, withdrawal or suspension is issued and the
Initial Purchaser so requests, to obtain the lifting thereof as promptly as
possible.
(d) The Company shall, during any period in the three years (or such
shorter period as may then be applicable under the Act regarding the holding
period for securities under Rule 144(k) of the Act or any successor rule) after
the Closing Date in which the Company is not subject to Section 13 or 15(d) of
the Exchange Act, make available, upon request, to any holder of such Shares in
connection with any sale thereof and any prospective purchaser of Shares from
such holder the information ("Rule 144A Information") specified in Rule
144A(d)(4) under the Act, and any such 144A information will not, at the date
thereof, contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light
of the circumstances under which they are made, not misleading.
(e) Neither the Company nor any affiliate (as defined in Rule 501(b)
of Regulation D) of the Company will solicit any offer to buy or offer or sell
the Shares by means of any form of general solicitation or general advertising
(within the meaning of Regulation D).
(f) None of the Company, its affiliates nor any person acting on
behalf of the Company or its affiliates will engage in any directed selling
efforts with respect to the Shares within the meaning of Regulation S, and the
Company, its affiliates and each such person acting on its or their behalf will
comply with the offering restrictions requirement of Regulation S.
(g) Neither the Company or any affiliate (as defined in Rule 501(b) of
Regulation D) will sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Act) the offering of
which security will be integrated with the sale of the Shares in a manner which
would require the registration of the Shares under the Act.
(h) The Company will apply the net proceeds from the sale of the
Shares as set forth under "Use of Proceeds" in the Final Memorandum.
(i) The Company will not, directly or indirectly, without the prior
written consent of the Initial Purchaser, offer, sell, offer to sell, contract
to sell, pledge, grant any option to purchase or otherwise sell or dispose (or
announce any offer, sale, offer of sale, contract of sale, pledge, grant of any
option to purchase or other sale or disposition) of any shares of Common Stock
or any securities convertible into, or exchangeable or exercisable for, shares
of Common Stock (i) prior to the Closing Date and (ii) for a period of 180 days
after the Closing Date, except pursuant to this Agreement and except for the
grant of stock options or other awards pursuant to the Company's Long-Term Stock
Incentive Plan or issuances pursuant to the exercise of such options or other
awards.
(j) The Company shall not, during the period commencing on the date
hereof and ending on the Closing Date, issue any press release or other
communication, or hold any press
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conference with respect to the Company, its financial condition, results of
operations, business, properties, assets or liabilities, or the Offering,
without the prior written consent of the Initial Purchaser.
(k) The Company shall use reasonable efforts in cooperation with the
Initial Purchaser to obtain permission for the Shares sold to Qualified
Institutional Buyers, as such term is defined in Rule 144A under the Securities
Act to be eligible for clearance and settlement through the Depository Trust
Company.
(l) During the period of 3 years hereafter, the Company will furnish
to the Initial Purchaser (i) as soon as practicable after the end of each fiscal
year, copies of annual distributions of audited financial statements containing
the balance sheet of the Company as of the close of such fiscal year and
statements of income, stockholders' equity and cash flows for the year then
ended and the opinion thereof of the Company's independent public accountants;
(ii) as soon as practicable after the issuance or filing thereof, copies of
quarterly distributions of unaudited financial statements, all current and
periodic reports promptly following the issuance or filing thereof by the
Company with any securities exchange, the Commission or any other regulatory
authority with whom the Company's securities are then registered; and (iii)
until the Company has conducted an initial public offering of its securities, a
description of any event having a Material Adverse Effect; and, (iv) as soon as
available, copies of any report or communication of the Company mailed generally
to holders of its Common Stock.
(m) The Company will continue to elect to qualify as a REIT under the
Code and will use its best efforts to continue to meet the requirements to
qualify as a REIT.
(n) The Company will retain Deloitte & Touche LLP, as its qualified
accountants and such qualified tax experts as the Company may identify for a
period of not less than 2 years beginning on the Closing Date to assist the
Company in developing appropriate accounting systems and testing procedures and
to conduct quarterly compliance reviews designed to determine compliance with
the REIT provisions of the Code and the Company's exempt status under the ▇▇▇▇
▇▇▇.
(o) The Company will not invest in futures contracts, options on
futures contracts or options on commodities unless the Company is exempt from
the registration requirements of the Commodity Exchange Act, as amended, or
otherwise complies with the Commodity Exchange Act, as amended. In addition,
the Company will not engage in any activities which might be subject to the
Commodity Exchange Act unless such activities are exempt from that Act or
otherwise comply with that Act or with an applicable no-action letter to the
Company from the Commodities Futures Trading Commission.
(p) Upon the Closing, the Company shall automatically grant to the
Initial Purchaser the right of first refusal to act as exclusive financial
advisor, underwriter or agent, as the case may be, in connection with the
Company's future financings, strategic opportunities and initiatives, including
(i) any sale of assets or stock, merger or acquisition, (ii) an offering of
equity
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or debt securities, (iii) any securitization or similar transaction, (iv) any
exercise of warrants or options to purchase the Company's securities by
employees, agents or others pursuant to a cashless exercise or other exercise
program for a term of one year. The one-year term shall be renewed annually
unless terminated by the Company or the Initial Purchaser. Upon notice of
termination by the Company or the Initial Purchaser, the term of the right of
first refusal shall continue for an additional one-year period.
6. Expenses. The Company will pay all costs and expenses incident to the
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performance of its obligations under this Agreement, whether or not the
transactions contemplated herein are consummated or this Agreement is terminated
pursuant to Section 11 hereof, including all costs and expenses incident to (i)
the printing or other production of documents with respect to the transactions,
including any costs of printing the Preliminary Memorandum and the Final
Memorandum, and any amendment or supplement thereto, this Agreement, the
Registration Rights Agreement and any blue sky memoranda, (ii) all arrangements
relating to the delivery to the Initial Purchaser of copies of the foregoing
documents, (iii) the fees and disbursements of the counsel, the accountants and
any other experts or advisors retained by the Company, (iv) preparation,
issuance and delivery of any certificates evidencing the Shares, including
transfer agent's and registrar's fees, (v) the qualification or exemption of the
Shares under state securities and blue sky laws, and (vi) the designation of the
Shares as PORTAL eligible securities by the National Association of Securities
Dealers, Inc. PORTAL Market. If the sale of the Shares provided for herein is
consummated, the Company will reimburse the Initial Purchaser for its reasonable
out-of-pocket expenses (including counsel fees and disbursements) that shall
have been incurred by it in connection with the purchase and sale of the Shares
in an amount equal to $80,000. If the sale of the Shares provided for herein is
not consummated because any condition to the obligations of the Initial
Purchaser set forth in Section 7 hereof is not satisfied, because this Agreement
is terminated pursuant to Section 10 hereof or because of any failure, refusal
or inability on the part of the Company to perform all obligations and satisfy
all conditions on its part to be performed or satisfied hereunder other than by
reason of a breach or default of the Initial Purchaser, the Company will
reimburse the Initial Purchaser upon demand for reasonable out-of-pocket
expenses (including counsel fees and disbursements) that shall have been
incurred by it in connection with the proposed purchase and sale of the Shares
provided that such expenses do not exceed a total of $125,000, without the
written consent of the Company. The Company shall not in any event be liable to
the Initial Purchaser for the loss of anticipated profits from the transactions
covered by this Agreement. Notwithstanding the foregoing, the Initial Purchaser
will pay 60% of the blue sky fees and expenses incurred in connection with the
Offering.
7. Conditions of the Initial Purchaser's Obligations. The obligation of
-------------------------------------------------
the Initial Purchaser to purchase the Shares shall be subject to the accuracy of
the representations and warranties of the Company contained herein as of the
date and time that this Agreement is executed and delivered by the parties
hereto (the "Execution Time") and the Closing Date, to the accuracy of the
statements of the Company's officers made pursuant to the provisions hereof, to
the performance by the Company of its covenants and agreements hereunder and to
the following additional conditions:
-12-
(a) (i) The Offering contemplated by this Agreement will become
qualified or be exempt from qualification under the securities laws of the
several states pursuant to subsection 5(b) not later than the Closing Date, and
(ii) at the Closing Date no stop order suspending the sale of the Shares shall
have been issued, and no proceeding for that purpose shall have been initiated
or threatened.
(b) The Final Memorandum, or any supplement thereto, will not contain
any untrue statement of a material fact, or omit to state any material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(c) The Initial Purchaser shall have received an opinion, dated the
Closing Date, of ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, counsel for the Company, in the
form of Exhibit E.
In rendering any such opinion, such counsel may rely, as to matters of
local law, on opinions of local counsel, and as to matters of fact on
certificates of responsible officers of the Company and public officials, in
which case their opinion is to state that they are so doing and that the Initial
Purchaser is justified in relying on such opinions or certificates.
References to the Final Memorandum in this paragraph (c) shall include
any amendment or supplement thereto at the date of such opinion.
(d) The Initial Purchaser shall have received from Deloitte & Touche
LLP a letter or letters dated, respectively, the date hereof and the Closing
Date, in form and substance satisfactory to the Initial Purchaser, to the effect
that:
(i) they are independent accountants with respect to the Company
within the meaning of Rule 101 of the AICPA's Code of Professional Conduct;
(ii) in their opinion, the audited financial statements examined
by them and included in the Final Memorandum comply in form in all material
respects with the applicable accounting requirements of the Act and the
related published rules and regulations;
(iii) on the basis of carrying out certain specified procedures
(which do not constitute an examination made in accordance with generally
accepted auditing standards) that would not necessarily reveal matters of
significance with respect to the comments set forth in this paragraph
(iii), a reading of the minute books of the stockholders, the board of
directors and any committees thereof of the Company, and inquiries of
certain officials of the Company who have responsibility for financial and
accounting matters, nothing came to their attention that caused them to
believe that at a specific date not more than three business days prior to
the date of such letter, there were any changes in the capital stock or
total debt of the Company or any decreases in assets or stockholders'
equity of the Company, in each case compared with amounts shown on the
December 18, 1996 balance sheet included in the
-13-
Final Memorandum; and, except in all instances for changes, decreases or
increases set forth in such letter; and
(iv) they have carried out certain specified procedures, not
constituting an audit, with respect to certain amounts, percentages and
financial information that are derived from the general accounting records
of the Company and its consolidated subsidiaries and are included in the
Final Memorandum, and have compared such amounts, percentages and financial
information with such records of the Company and its consolidated
subsidiaries and with information derived from such records and have found
them to be in agreement, excluding any questions of legal interpretation.
In the event that the letters referred to above set forth any such
changes, decreases or increases which, in the reasonable discretion of the
Initial Purchaser, are likely to result in a Material Adverse Effect, it shall
be a further condition to the obligations of the Initial Purchaser such letters
shall be accompanied by a written explanation of the Company as to the
significance thereof, unless the Initial Purchaser deems such explanation
unnecessary.
References to the Final Memorandum in this paragraph (d) with respect
to either letter referred to above shall include any amendment or supplement
thereto at the date of such letter.
(e) The Initial Purchaser shall have received from ▇▇▇▇▇▇▇ & ▇▇▇▇▇
L.L.P., counsel for the Initial Purchaser, such opinion or opinions, dated the
Closing Date, with respect to the issuance and sale of the Shares, the Final
Memorandum (together with any amendment or supplement thereof or thereto) and
other related matters as the Initial Purchaser may reasonably require, and the
Company shall have furnished to such counsel such documents as they request for
the purpose of enabling them to pass upon such matters.
(f) The Initial Purchaser shall have received a certificate, dated the
Closing Date, of ▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇ and Wellington J. St. Claire in their
capacities as the Chief Executive Officer and Chairman of the Board and Vice
Chairman of the Board, respectively, of the Company to the effect that the
signers of such certificate have carefully examined the Final Memorandum, any
amendment or supplement to the Final Memorandum and this Agreement and that:
(i) the representations and warranties of the Company in this
Agreement are true and correct as if made on and as of the Closing Date;
the Final Memorandum, as amended or supplemented as of the Closing Date,
does not include any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; and
the Company has performed all covenants and agreements and satisfied all
conditions on its part to be performed or satisfied at or prior to the
Closing Date; and
(ii) subsequent to the respective dates as of which information
is given in the Final Memorandum (exclusive of any amendment or supplement
thereof or thereto), the Company has not sustained any loss or interference
with its business or properties having or
-14-
resulting in a Material Adverse Effect from fire, flood, hurricane,
accident or other calamity, whether or not covered by insurance, or from
any labor dispute or any legal or governmental proceeding, and there has
not been any event, circumstance, or development that results in, or that
the Company believes would result in, a Material Adverse Effect, except in
each case as described in or contemplated by the Final Memorandum
(exclusive of any amendment or supplement thereto).
(g) The Initial Purchaser shall receive a certificate of the Secretary
or Assistant Secretary of the Company certifying as to (i) the Articles of
Incorporation of the Company and any amendments thereto, (ii) the Bylaws of the
Company, and (iii) resolutions of the Board of Directors of the Company
authorizing the execution and delivery of this Agreement, the Registration
Rights Agreement and the other offering documents and (iv) a specimen Common
Stock certificate.
(h) The Initial Purchaser shall have received from each officer and
director of the Company an agreement to the effect that such person will not,
directly or indirectly, without the prior written consent of the Initial
Purchaser, offer, sell, offer to sell, contract to sell, pledge, grant any
option to purchase or otherwise sell or dispose (or announce any offer, sale,
offer of sale, contract of sale, pledge, grant of an option to purchase or other
sale or disposition) of any shares of Common Stock or any securities convertible
into, or exchangeable or exercisable for, shares of Common Stock for a period of
180 days after the Closing Date.
(i) On or before the Closing Date, the Initial Purchaser and counsel
for the Initial Purchaser shall have received such further certificates,
documents or other information as they may have reasonably requested from the
Company.
(j) At the Closing Date, the Company shall have delivered to the
Initial Purchaser the duly authorized and executed Registration Rights
Agreement.
All opinions, certificates, letters and documents delivered pursuant
to this Agreement will comply with the provisions hereof only if they are
reasonably satisfactory in all material respects to the Initial Purchaser and
counsel for the Initial Purchaser. The Company shall furnish to the Initial
Purchaser such copies of such opinions, certificates, letters and documents in
such quantities as the Initial Purchaser and counsel for the Initial Purchaser
shall reasonably request.
If any of the conditions specified in this Section 7 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
or if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Initial Purchaser and counsel for the Initial Purchaser,
this Agreement and all obligations of the Initial Purchaser hereunder may be
canceled at, or at any time prior to, the Closing Date by the Initial Purchaser.
Notice of such cancellation shall be given to the Company in writing or by
telephone or telegraph confirmed in writing.
-15-
8. Indemnification and Contribution.
--------------------------------
(a) The Company agrees to indemnify and hold harmless the Initial
Purchaser and each person, if any, who controls the Initial Purchaser within the
meaning of the Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), against any and all losses, claims, damages or liabilities,
joint or several, to which the Initial Purchaser or such controlling person may
become subject under the Act, the Exchange Act, any applicable federal or state
law, or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of any
material fact contained in (A) the Preliminary Memorandum, the Final
Memorandum or any Rule 144A Information provided by the Company to any
holder or prospective purchaser of securities pursuant to Section 5(d) or
any amendment or supplement thereto or (B) any application or other
document, or any amendment or supplement thereto, executed by the Company
or based upon written information furnished by or on behalf of the Company
filed in any jurisdiction in order to qualify the Shares under the
securities or blue sky laws thereof or filed with the Commission or any
securities association or securities exchange (each, an "Application");
-----------
(ii) the omission or alleged omission to state in the
Preliminary Memorandum, Final Memorandum or any amendment or supplement
thereto, any Rule 144A Information or any Application, a material fact
required to be stated therein or necessary to make the statements therein
not misleading; or
(iii) any untrue statement or alleged untrue statement of any
material fact contained in any audio or visual materials prepared in
cooperation with the Company and used in connection with the marketing of
the Shares, including without limitation, slides, videos, films, tape
recordings, and, such party or parties, as the case may be, will reimburse,
as incurred, the Initial Purchaser and each such controlling person for any
legal or other expenses reasonably incurred by the Initial Purchaser or
such controlling person in connection with investigating, defending against
or appearing as a third-party witness in connection with any such loss,
claim, damage, liability or action;
provided, however, the Company will not be liable in any such case to the
-------- -------
extent that any such loss, claim, damage or liability arises out of or is based
upon, an untrue statement or alleged untrue statement or omission or alleged
omission made in the Preliminary Memorandum or the Final Memorandum or any
amendment or supplement thereto in reliance upon and in conformity with the
information furnished to the Company by the Initial Purchaser specifically for
inclusion therein; provided, further, that the foregoing indemnity with respect
-------- -------
to any untrue statement contained in or omission from a Preliminary Memorandum
shall not inure to the benefit of the Initial Purchaser (or any person
controlling the Initial Purchaser) from whom the person asserting any such loss,
liability, claim, damage or action purchased the Shares which are the subject
thereof if a copy of the Final Memorandum (or the Final Memorandum as then
amended or supplemented if the Company shall
-16-
have furnished any amendments or supplements thereto) was not sent or given by
or on behalf of the Initial Purchaser to such person as of or prior to the
written confirmation of the sale of such Shares to such person if such untrue
statement contained in or omission from such Preliminary Memorandum was
corrected in the Final Memorandum (or the Final Memorandum as so amended or
supplemented), and if the Company had previously furnished copies of such
corrected Final Memorandum to the Initial Purchaser. This indemnity agreement
will be in addition to any liability that the Company may otherwise have. The
Company will not, without the prior written consent of the Initial Purchaser,
settle or compromise or consent to the entry of any judgment in any pending or
threatened claim, action, suit or proceeding in respect of which indemnification
may be sought hereunder (whether or not the Initial Purchaser or any person who
controls the Initial Purchaser within the meaning of the Act or the Exchange Act
is a party to such claim, action, suit or proceeding), unless such settlement,
compromise or consent includes an unconditional release of the Initial Purchaser
and such controlling persons from all liability arising out of such claim,
action, suit or proceeding.
(b) The Initial Purchaser agrees to indemnify and hold harmless the
Company, its directors, its officers, and each person who controls the Company
within the meaning of either the Act or the Exchange Act, to the same extent as
the foregoing indemnity from the Company to the Initial Purchaser, but only with
reference to written information relating to the Initial Purchaser furnished to
the Company by or on behalf of the Initial Purchaser specifically for inclusion
in the Preliminary Memorandum or the Final Memorandum, or in any amendment
thereof or supplement thereto. This indemnity agreement will be in addition to
any liability which the Initial Purchaser may otherwise have. The Company
acknowledges that the statements set forth in (i) the first sentence of the last
paragraph of the cover page in the Preliminary Memorandum and the Final
Memorandum and (ii) on the first, second and last sentences in the fourth
paragraph under the caption "Plan of Distribution" in the Preliminary Memorandum
and Final Memorandum constitute the only information furnished in writing by or
on behalf of the Initial Purchaser for inclusion in the Preliminary Memorandum
or the Final Memorandum.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof,
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than under
this Section 8, except to the extent the indemnifying party is prejudiced as a
result of such failure. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party; provided, however, that if the defendants in any such
-------- -------
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded or shall have been advised by
its counsel that there may be one or more legal defenses available to it and/or
other indemnified parties that conflict with those available to the indemnifying
party, the indemnifying party shall not have the right to direct the defense of
such action on behalf of such indemnified party
-17-
or parties and such indemnified party or parties shall have the right to select
separate counsel to defend such action on behalf of such indemnified party or
parties. After notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof and approval by such indemnified
party of counsel appointed to defend such action, the indemnifying party will
not be liable to such indemnified party under this Section 8 for any legal or
other expenses, other than reasonable costs of investigation, subsequently
incurred by such indemnified party in connection with the defense thereof,
unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the next preceding sentence (it being understood,
however, that in connection with such action the indemnifying party shall not be
liable for the expenses of more than one separate counsel (in addition to local
counsel) in any one action or separate but substantially similar actions in the
same jurisdiction arising out of the same general allegations or circumstances,
designated by the Initial Purchaser, representing the indemnified parties under
paragraph (a) of this Section 8 who are parties to such action or actions) or
(ii) the indemnifying party does not promptly retain counsel satisfactory to the
indemnified party or (iii) the indemnifying party has authorized the employment
of counsel for the indemnified party at the expense of the indemnifying party.
After such notice from the indemnifying party to such indemnified party, the
indemnifying party will not be liable for the costs and expenses of any
settlement of such action effected by such indemnified party without the consent
of the indemnifying party.
(d) In circumstances in which the indemnity agreement provided for in
the preceding paragraphs of this Section 8 is unavailable or insufficient, for
any reason, to hold harmless an indemnified party in respect of any losses,
claims, damages or liabilities (or actions in respect thereof), each
indemnifying party, in order to provide for just and equitable contribution,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect (i) the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the offering of the Shares or (ii) if the
allocation provided by the foregoing clause (i) is not permitted by applicable
law, not only such relative benefits but also the relative fault of the
indemnifying party or parties on the one hand and the indemnified party on the
other in connection with the statements or omissions or alleged statements or
omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Initial Purchaser on the other shall be deemed to be in the same
proportion as the total proceeds from the offering (before deducting expenses)
received by the Company bear to the total Initial Purchaser's discount with
respect to the Shares. The relative fault of the parties shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Initial Purchaser, the
parties' relative intents, knowledge, access to information and opportunity to
correct or prevent such statement or omission, and any other equitable
considerations appropriate in the circumstances. The Company and the Initial
Purchaser agree that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to above in this paragraph (c). Notwithstanding any
other provision
-18-
of this paragraph (c), no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation, and in no
case shall the Initial Purchaser be responsible for any amount in excess of the
Initial Purchaser's discount applicable to the Shares purchased by the Initial
Purchaser hereunder. For the purposes of this paragraph 8(c), each person, if
any, who controls the Initial Purchaser within the meaning of the Act or the
Exchange Act shall have the same rights to contribution as the Initial
Purchaser, and each director and officer of the Company, and each person, if
any, who controls the Company within the meaning of the Act or the Exchange Act,
shall have the same rights to contribution as the Company.
9. Survival. The respective representations, warranties, agreements,
--------
covenants, indemnities and other statements of the Company, its officers and the
Initial Purchaser set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement shall remain in full force and effect,
regardless of (i) any investigation made by or on behalf of the Company, any of
its officers or directors, the Initial Purchaser and each person, if any, who
controls the Initial Purchaser within the meaning of the Act or the Exchange Act
and their respective directors, officers, employees, agents and controlling
persons referred to in Section 8 hereof and (ii) delivery of and payment for the
Shares. The respective agreements, covenants, indemnities and other statements
set forth in Sections 6 and 8 hereof shall remain in full force and effect,
regardless of any termination or cancellation of this Agreement.
10. Termination.
-----------
(a) This Agreement may be terminated with respect to the Shares in the
sole discretion of the Initial Purchaser upon notice to the Company given prior
to the Closing Date, respectively, in the event that the Company shall have
failed, refused or been unable to perform all obligations and satisfy all
conditions on its part to be performed or satisfied hereunder at or prior
thereto:
(i) the Company shall have, in the reasonable judgment of the
Initial Purchaser, sustained any loss or interference with its business or
properties having or resulting in a Material Adverse Effect from fire,
flood, hurricane, accident or other calamity, whether or not covered by
insurance, or from any labor dispute or any legal or governmental
proceeding or there shall have been any event, circumstance of development
that results in, or that the Company believes would result in, a Material
Adverse Effect, except in each case as described in or contemplated by the
Final Memorandum (exclusive of any amendment or supplement thereto);
(ii) trading generally in securities on the New York Stock
Exchange or Nasdaq National Market shall have been suspended or minimum or
maximum prices shall generally have been established on either such
exchange or market system;
(iii) a banking moratorium shall have been declared by New York
or United States authorities; or
-19-
(iv) there shall have been (A) an outbreak or escalation of major
hostilities between the United States and any foreign power, (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States or (C) any other calamity or crisis or material
adverse change in general economic, political or financial conditions
having an effect on the U.S. financial markets that, in the reasonable
judgment of the Initial Purchaser, makes it impractical or inadvisable to
proceed with the offering or the delivery of the Shares as contemplated by
the Final Memorandum, as amended as of the date hereof.
(b) Termination of this Agreement pursuant to this Section 10 shall be
without liability of any party to any other party except for the expenses to be
paid by the Company pursuant to Section 6 and except as provided in Section 8
hereof.
11. Notices. All communications hereunder shall be in writing and, if
-------
sent to the Initial Purchaser, shall be delivered or sent by mail, telex or
facsimile transmission and confirmed in writing to Friedman, Billings, ▇▇▇▇▇▇ &
Co., Inc., Potomac Tower, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇; and if sent to the Company, shall be
delivered or sent by mail, telex or facsimile transmission and confirmed in
writing to the Company at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: Chief Executive Officer with a copy of ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇.
12. Successors. This Agreement shall inure to the benefit of and shall be
----------
binding upon the Initial Purchaser, the Company and their respective successors
and legal representatives, and nothing expressed or mentioned in this Agreement
is intended or shall be construed to give any other person any legal or
equitable right, remedy or claim under or in respect of this Agreement, or any
provisions herein contained, this Agreement and all conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit of such
persons and for the benefit of no other person except that the indemnities of
the Company contained in Section 8 of this Agreement shall also be for the
benefit of any person or persons who control the Initial Purchaser within the
meaning of the Act or the Exchange Act. This Agreement shall not be assignable
by the parties. The term "successors" shall not include any purchaser of the
Shares from the Initial Purchaser merely by reason of such purchase.
13. Applicable Law. The validity and interpretation of this Agreement,
--------------
and the terms and conditions set forth herein, shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to any provisions relating to conflicts of laws.
14. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
-20-
If the foregoing correctly sets forth our understanding please indicate
your acceptance thereof in the space provided below for that purpose, whereupon
this letter shall constitute a binding agreement between us.
Very truly yours,
ANNALY MORTGAGE MANAGEMENT, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇
____________________________________
Name: ▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇
Title: Chief Executive Officer and
Chairman of the Board
The foregoing Agreement is hereby confirmed
and accepted as of the date first above written.
FRIEDMAN, BILLINGS, ▇▇▇▇▇▇ & CO., INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
___________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Managing Director
-21-
EXHIBIT A
CERTIFICATE OF RULE 144A
QUALIFIED INSTITUTIONAL BUYER
Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc.
Potomac Tower
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Gentlemen:
We certify, to enable you to make offers and sales of securities pursuant
to Rule 144A under the Securities Act of 1933, as amended (the "Securities
Act"), that we are a qualified institutional buyer in that we satisfy the
requirements of one or more of paragraphs (i) through (vi) hereof (check
applicable box(es)).
[] (i) We are an entity referred to in sub-paragraphs (A) through (F) hereof
and in the aggregate owned and invested on a discretionary basis, for our
own account and the accounts of other persons, at least the amount of
securities specified below (not less than $100 million), calculated as
provided in Rule 144A as of the date specified below.
[] (A) Corporation, etc. A corporation (other than a bank, savings and
loan or similar institution referred to in (ii) below), partnership,
Massachusetts or similar business trust, organization described in Section
501(c)(3) of the Internal Revenue Code, Small Business Development Company
licensed by the U.S. Small Business Administration, under Section 301(c) or (d)
of the Small Business Investment Act of 1958, or business development company as
defined in Section 202(a)(22) of the Investment Advisers Act of 1940; or
[ ] (B) Insurance Company. An Insurance Company as defined in Section
(13) of the Act.
[ ] (C) ERISA Plan. An employee benefits plan within the meaning of Title
I of the Employee Retirement Income Security Act of 1974; or
[ ] (D) State or Local Plan. A plan established and maintained by a
state, its political subdivisions, or any agency or instrumentality
of a state or its political subdivisions, for the benefit of its
employees; or
[ ] (E) Investment Company. An investment company registered under the
Investment Company Act of 1940 or any business development company
as defined in Section 2(a)(48) of that Act; or
[ ] (F) Investment Adviser. An investment adviser registered under the
Investment Advisers Act of 1940.
[] (ii) Bank or Savings and Loan. We are a bank defined in Section3(a)(2) of
the Act; a savings and loan association or other institution referenced in
Section 3(a)(5)(A) of the Securities Act, or a foreign bank or savings and
loan association or equivalent institution that
Exh. A-1
in the aggregate owned and invested on a discretionary basis, for our own
account and the accounts of other persons, at least the amount of
securities specified below (not less than $100 million), calculated as
provided in Rule 144A, as of the date specified below and had an audited
net worth of at least $25 million as of the end of our most recent fiscal
year. (This paragraph does not include bank commingled funds.)
[] (iii) One of a Family of Investment Companies. We are an investment company
registered under the Investment Company Act of 1940 that is part of a
"family of investment companies", as defined in Rule 144A, that owned in
the aggregate at least the amount of securities specified below (not less
than $100 million), calculated as provided in Rule 144A, as of the date
specified below.
[] (iv) Dealer. We are a dealer registered under Section 15 of the Securities
Exchange Act of 1934 (the "Exchange Act") that in the aggregate owned and
invested on a discretionary for our own account and the accounts of other
persons, at least the amount of securities specified below (not less than
$10 million), calculated as provided in Rule 144A, as of the date specified
below.
[] (v) Dealer (Riskless Principal Transaction). We are a dealer registered
under Section 15 of the Exchange Act acting in a riskless principal
transaction on behalf of a qualified institutional buyer.
[] (vi) Entity Owned by Qualified Buyers. We are an entity, all of the equity
owners of which are qualified institutional buyers (each satisfying one or
more of (i) through (iv) above including, as applicable, the $100 million
test).
In calculating the amount of securities owned or invested by an entity as
provided in Rule 144A: (a) repurchase agreements, securities owned but subject
to repurchase agreements, swaps, bank deposit instruments, loan participation,
securities of affiliates and dealers' unsold allotments are excluded; and (b)
securities are valued at cost, except they may be valued at market if they are
reported in financial statements at market and no current cost information is
published.
Each entity, including a parent or subsidiary, must separately meet the
requirements to be a qualified institutional buyer under Rule 144A. Securities
owned by any subsidiary are included as owned or invested by its parent entity
for purposes of Rule 144A only if (1) the subsidiary is consolidated in the
parent entity's financial statements and (2) the subsidiary's investments are
managed under the parent entity's direction (except that a subsidiary's
securities are not included if the parent entity is itself a majority-owned
consolidated subsidiary of another enterprise and is not a reporting company
under the Exchange Act).
We further certify that we will purchase securities under Rule 144A from or
through you only for our account or for the account of another entity which is a
qualified institutional buyer. We will not purchase securities for another
entity under Rule 144A unless it satisfies one or more paragraphs (i) through
(vi) above including, as applicable, the $100 million test.
Exh. A-2
We agree to notify you of any change in the certifications herein, and each
purchase by us of securities under Rule 144A from or through you will constitute
a reaffirmation of the certifications herein (as modified by any such notice) as
of the time of such purchase.
Amount of Securities: $ _________________
(State specific amount owned/invested - may
be approximate, but no range or minimum)
Most Recent Fiscal Year-End: ____________
Date Owned/Invested: ____________________
(Complete only if this date is after most
recent fiscal year-end)
Date: _____________________, 19__________
By: _____________________________________
Name: ___________________________________
Title: __________________________________
* Certificate must be signed by the Institution's chief financial officer or
another executive officer, except that if the Institution is a member of a
"family of investment companies", the certificate must be signed by an
executive officer of such Institution's Investment Adviser.
Exh. A-3
EXHIBIT B
INVESTMENT LETTER
FOR INSTITUTIONAL ACCREDITED INVESTORS
Annaly Mortgage Management, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc.
Potomac Tower
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
In connection with our proposed purchase of ___ shares (the "Shares") of
common stock, par value $.01 per share (the "Common Stock"), of Annaly Mortgage
Management, Inc., a Maryland corporation (the "Company"), we confirm that:
1. We understand that the Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and may not be sold
except as permitted in the following sentence. We understand and agree, on our
own behalf and on behalf of any accounts for which we are acting as hereinafter
stated, (x) that such Shares are being offered only in a transaction not
involving any public offering within the meaning of the Securities Act, (y) that
if we should resell, pledge or otherwise transfer such Shares within three years
(or such shorter period as may then be applicable under the Securities Act)
after the date of the original issuance of the Shares or within three months
after we cease to be an affiliate (within the meaning of Rule 144 under the
Securities Act) of the Company, such Shares may be resold, pledged or
transferred only (i) to the Company, (ii) so long as the Shares are eligible for
resale pursuant to Rule 144A under the Securities Act ("Rule 144A"), to a person
whom we reasonably believe is a "qualified institutional buyer" (as defined in
Rule 144A) ("QIB") that purchases for its own account or for the account of a
QIB to whom notice is given that the resale, pledge or transfer is being made in
reliance on Rule 144A (as indicated by the box checked by the transferor on the
Certificate of Transfer on the reverse of the certificate representing the
Shares), (iii) in an "offshore transaction" (within the meaning of Regulation S
under the Securities Act) (as indicated by the box checked by the transferor on
the Certificate of Transfer on the reverse of the certificate representing the
Shares), and, if such transfer is being effected prior to the expiration of the
"one year restricted period" (within the meaning of Rule 903(c)(3) of Regulation
S under the Securities Act), the transferee shall have certified to the Company
and the Transfer Agent that such transfer is to a non-U.S. person (within the
meaning of Regulation S) and that such transferee is acquiring the Shares in an
offshore transaction (within the meaning of Regulation S), (iv) to an
institution that is an "accredited investor" as defined in Rule 501(a)(1), (2),
(3) or (7) of Regulation D under the Securities Act (as indicated by the box
checked by the transferor on the Certificate of Transfer on the reverse of the
certificate representing the Shares) that has certified to the Company and the
Transfer Agent that it is such an institutional
Exh. B-1
accredited investor and is acquiring the Shares for investment purposes and not
for distribution (provided that no transferor who has purchased Shares from any
person other than a QIB or an institutional accredited investor pursuant to
clause (iii) shall be permitted to transfer any Shares so purchased by it to an
institutional accredited investor pursuant to this clause (iv) prior to the
expiration of the "one year restricted period" (within the meaning of Rule
903(c)(3) of Regulation S under the Securities Act)), (v) pursuant to an
exemption from registration under the Securities Act provided by Rule 144 (if
applicable) under the Securities Act or (vi) pursuant to an effective
registration statement under the Securities Act and in each case in accordance
with any applicable securities laws of any state of the United States or other
jurisdictions, and we will notify any purchaser of the Shares from us of the
above resale restrictions, if then applicable. We further understand and agree
that, in connection with any transfer of the Shares by us pursuant to clauses
(iii), (iv) or (v) of the previous sentence, we and the transferee of the Shares
will deliver to the Company and the Transfer Agent certificates which may be
obtained from the Company and the Transfer Agent and such other certificates and
other information (including an opinion of counsel) as they may reasonably
require to confirm that any such transfer complies with the foregoing
restrictions.
We are able to fend for ourselves in the transactions contemplated by
the Offering Memorandum relating to the Shares, we have such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of our investment in the Shares, and we and any accounts for
which we are acting are each able to bear the economic risk of our or its
investment for an indefinite period of time and can afford the complete loss of
such investment.
3. We understand that the Company and Friedman, Billings, ▇▇▇▇▇▇ & Co.,
Inc., as the initial purchaser of the Shares (the "Initial Purchaser"), and
others will rely upon the truth and accuracy of the foregoing acknowledgments,
representations and agreements and we agree that if any of the acknowledgments,
representations and warranties deemed to have been made by us by our purchase of
Shares, for our own account or for one or more accounts as to each of which we
exercise sole investment discretion, are no longer accurate, we shall promptly
notify the Company and the Initial Purchaser.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act or, if the Shares are to be
purchased for one or more accounts for which we are acting as fiduciary or
agent, each such investor account is an institutional Accredited Investor on a
like basis.
5. We are acquiring the Shares for our own account (or such investor
accounts set forth in paragraph 4) and not with a view to or for resale in
connection with any distribution or public offering thereof in violation of the
Securities Act.
6. The Shares were not offered or sold to us by any form of general
solicitation or general advertising.
7. The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), imposes certain requirements on those employee benefit plans to which
it applies ("Plans") and on those persons who are fiduciaries with respect to
such Plans. Plans cannot purchase Shares unless
Exh. B-2
(i) they are represented in this regard by a "qualified professional asset
manager" as that term is defined in U.S. Department of Labor Prohibited
Transaction Exemption ("PTE") 84-14, and other conditions to the applicability
of PTE 84-14 to the purchase and holding of Common Stock are satisfied, or (ii)
the conditions to the applicability of (a) PTE 90-1 (for insurance company
pooled separate accounts), (b) PTE 91-38 (for bank collective funds), (c) PTE
95-60 (for insurance company general accounts) or (d) PTE 96-23 (for in-house
asset managers) to the purchase and holding of Common Stock are satisfied. By
purchasing Common Stock, the investing Plan is deemed to represent and agree
that its is so represented and that such conditions are satisfied.
Employee benefit Plans that are governmental plans (as defined in section
3(32) of ERISA) are not subject to ERISA requirements but may be subject to
somewhat similar provisions of other applicable federal or state law or legal
restrictions on their ability to invest in shares of Common Stock. Accordingly,
governmental plans should consult with legal counsel prior to making an
investment.
The sale of shares to Plans is in no respect a representation by the
Company, the Initial Purchaser or any other person associated with the sale of
the Shares that such Shares meet all relevant legal requirements with respect to
investments by Plans generally or any particular Plan, or that such shares are
otherwise appropriate for Plans generally or any particular Plan.
8. We understand that we and our professional advisor(s), if any, have
the right to ask questions of and receive answers from the Company and its
officers and directors, and to obtain such information concerning the terms and
conditions of the offering of the Shares to the extent that the Company
possesses the same or can acquire it without unreasonable effort or expense, as
we and our advisor(s), if any, deem necessary to verify the accuracy of the
information referred to in the Offering Memorandum pursuant to which the Company
is offering the Shares to certain qualified offerees. We represent and agree
that prior to our agreement to purchase Shares we and our professional
advisor(s), if any, will have asked such questions, received such answers and
obtained such information as we deem necessary to verify the accuracy (i) of the
information referred to in the Offering Memorandum and (ii) of any other
information that we deem relevant to making an investment decision with respect
to the Shares.
9. You are entitled to rely upon this letter and you are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceeding or official inquiry with respect to the
matters covered hereby.
Very truly yours,
_____________________________________
(Name of Purchaser)
By:__________________________________
Address:_____________________________
_____________________________
Exh. B-3
EXHIBIT C
INVESTMENT LETTER FOR NON U.S. PURCHASERS
Annaly Mortgage Management, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc.
Potomac Tower
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
In connection with our proposed purchase of _______ shares (the "Shares")
of common stock, par value $.01 per share (the "Common Stock"), of Annaly
Mortgage Management, Inc., a Maryland corporation (the "Company"), we confirm
that:
1. We understand that the Shares have not been registered under the
United States Securities Act of 1933, as amended (the "Securities Act"), and may
not be sold except as permitted in the following sentence. We understand and
agree, on our own behalf and on behalf of any accounts for which we are acting
as hereinafter stated, (x) that such Shares are being offered only in a
transaction not involving any public offering within the meaning of the
Securities Act, (y) that if we should resell, pledge or otherwise transfer such
Shares within three years (or such shorter period as may then be applicable
under the Securities Act) after the date of the original issuance of the Shares
or within three months after we cease to be an affiliate (within the meaning of
Rule 144 under the Securities Act) of the Company, such Shares may be resold,
pledged or transferred only (i) to the Company, (ii) so long as Shares are
eligible for resale pursuant to Rule 144A under the Securities Act ("Rule
144A"), to a person whom we reasonably believe is a "qualified institutional
buyer" (as defined in Rule 144A) (a "QIB") that purchases for its own account or
for the account of a QIB to whom notice is given that the resale, pledge or
transfer is being made in reliance on Rule 144A (as indicated by the box checked
by the transferor on the Certificate of Transfer on the reverse of the
certificate representing the Shares), (iii) in an "offshore transaction" (within
the meaning of Regulation S under the Securities Act) (as indicated by the box
checked by the transferor on the Certificate of Transfer on the reverse of the
certificate representing the Shares), and, if such transfer is being effected
prior to the expiration of the "one year restricted period" (within the meaning
of Rule 903(c)(3) of Regulation S under the Securities Act) the transferee shall
have certified to the Company and the Transfer Agent that such transfer is to a
non-U.S. person (within the meaning of Regulation S) and that such transferee is
acquiring the Shares in an offshore transaction (within the meaning of
Regulation S), (iv) to an institution that is an "accredited investor" as
defined in rule 501(a)(1),(2),(3) or (7) of Regulation D under the Securities
Act (as indicated by the box checked by the transferor on the Certificate of
Transfer on the reverse of the certificate representing the Shares) that has
certified to the Company and the Transfer Agent that it is such an institutional
accredited investor and is acquiring the Shares for investment purposes and not
for distribution
C-1
(provided that no transferor who has purchased shares from any person other than
a QIB or an institutional accredited investor pursuant to clause (iii) shall be
permitted to transfer any Shares so purchased by it to an institutional
accredited investor pursuant to this clause (iv) prior to the expiration of the
"one year restricted period" (within the meaning of Rule 903(c)(3) of Regulation
S under the Securities Act)), (v) pursuant to an exemption from registration
under the Securities Act provided by Rule 144 (if applicable) under the
Securities Act, or (vi) pursuant to an effective registration statement under
the Securities Act and, in each case in accordance with any applicable
securities laws of any state of the United States or other jurisdictions, and we
will notify any purchaser of the Shares from us of the above resale restriction,
if then applicable. We further understand and agree that, in connection with
any transfer of the Shares by us pursuant to clause (iii), (iv) or (v) of the
previous sentence, we and the transferee of the Shares will deliver to the
Company and the Transfer Agent certificates which may be obtained from the
Company and the Transfer Agent and such other certificates and other
information, including an opinion of counsel, as the Company and the Transfer
Agent may request, to confirm that any such transfer complies with the foregoing
restrictions.
We are able to fend for ourselves in the transactions contemplated by
the Offering Memorandum relating to the Shares, we have such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of our investment in the Shares, and we and any accounts for
which we are acting are each able to bear the economic risk of our or its
investment for an indefinite period of time and can afford the complete loss of
such investment.
3. We have made ourselves familiar with the rules and restrictions set
forth in Regulation S.
4. We have not undertaken any activity for the purpose of, or that could
reasonably be expected to have the effect of, conditioning the market for any of
the Shares being offered in reliance on Regulation S.
5. We understand that the Company and Friedman, Billings, ▇▇▇▇▇▇ & Co.,
Inc., as the initial purchaser of the Shares (the "Initial Purchaser"), and
others will rely upon the truth and accuracy of the acknowledgments,
representations and agreements herein and we agree that if any of the
acknowledgments, representations and warranties deemed to have been made by us
by our purchase of Shares, for our own account or for one or more accounts as to
each of which we exercise sole investment discretion, are no longer accurate, we
shall promptly notify the Company and the Initial Purchaser.
6. We are not a U.S. person (and are not purchasing for the account or
benefit of a U.S. person) within the meaning of Regulation S under the
Securities Act.
7. Our principal address is outside the United States and we were outside
the United States at the time that any offer of the Shares was made to us and
the time that the buy order for our purchase of the Shares was originated.
C-2
8. We understand that we and our professional advisor(s), if any, have
the right to ask questions of and receive answers from the Company and its
officers and directors, and to obtain such information concerning the terms and
conditions of the offering of the Shares to the extent that the Company
possesses the same or can acquire it without unreasonable effort or expense, as
we and our advisor(s), if any, deem necessary to verify the accuracy of the
information referred to in the Offering Memorandum pursuant to which the Company
is offering the Shares to certain qualified offerees. We represent and agree
that prior to our agreement to purchase Shares we and our professional
advisor(s), if any, will have asked such questions, received such answers and
obtained such information as we deem necessary to verify the accuracy (i) of the
information referred to in the Offering Memorandum and (ii) of any other
information that we deem relevant to making an investment decision with respect
to the Shares.
9. You are entitled to rely upon this letter and you are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceeding or official inquiry with respect to the
matters covered hereby.
Very truly yours,
------------------------------------
(Name of Purchaser)
By:_________________________________
C-3
EXHIBIT D
NOTICE TO INVESTORS
OFFERS AND SALES BY THE INITIAL PURCHASER
The Shares have not been registered under the Securities Act and may not be
offered or sold except in accordance with an applicable exemption from the
registration requirements thereof. Accordingly, the Shares are being offered
and sold only (1) in the United States to "qualified institutional buyers" as
defined in Rule 144A under the Securities Act ("Qualified Institutional Buyers")
and to a limited number of other institutional "accredited investors" as defined
in Rule 501(a)(1), (2), (3) or (7) under the Securities Act ("Accredited
Investors") in a private sale exempt from the registration requirements of the
Securities Act, and (2) outside the United States to non-U.S. persons ("foreign
purchasers") in reliance upon Regulation S under the Securities Act. Each
Qualified Institutional Buyer that is a purchaser of Shares from the Initial
Purchaser will be required to sign a certificate in the form of Exhibit A
hereto. Each institutional Accredited Investor that is a purchaser of Shares
from the Initial Purchaser will be required to sign a certificate in the form of
Exhibit B hereto. Each foreign purchaser that is a purchaser of Shares from the
Initial Purchaser ("Initial Foreign Purchaser") will be required to sign a
certificate in the form of Exhibit C hereto.
INVESTOR REPRESENTATIONS AND RESTRICTIONS ON RESALE
Each purchaser of the Shares will be deemed to have represented and agreed as
follows:
1. Either:
(a) it is not a U.S. person (within the meaning of Regulation S
under the Securities Act) and is not acquiring the Shares for the
account or benefit of any U.S. person and, at the time its buy order
for the Shares was originated and at the time that any offer for the
Shares was made to it, it was outside the United States; it has made
itself familiar with the rules and restrictions set forth in
Regulation S; and it has not undertaken any activity for the purpose
of, or that could reasonably be expected to have the effect of,
conditioning the market for any of the Shares being offered in
reliance on Regulation S; or
(b) it is a Qualified Institutional Buyer within the meaning of
Rule 144A promulgated under the Securities Act and is aware that any
sale of the Shares to it will be made in reliance on Rule 144A. Such
acquisition will be for its own account or for the account of another
Qualified Institutional Buyer; or
(c) it is an institutional "Accredited Investor" within the
meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act
or, if the Shares are to be
▇▇▇. ▇-▇
purchased for one or more accounts for which it is acting as fiduciary
or agent, each such investor account is an institutional Accredited
Investor on a like basis; it is acquiring the Shares for its own
account (or such investor accounts) and not with a view to or for
resale in connection with any distribution or public offering thereof
in violation of the Securities Act; it has such knowledge and
experience in financial and business matters that it is capable of
evaluating the merits and risks of purchasing any of the Shares; it is
aware that it may be required to bear the economic risk of an
investment in the Shares for an indefinite period of time and it (or
such account) is able to bear such risk for an indefinite period; and
the Shares were not offered or sold to it by any form of general
solicitation or general advertising;
2. it acknowledges that the Shares have not been registered under the
Securities Act and may not be sold except as permitted below;
3. it understands and agrees (x) that such Shares are being offered
only in a transaction not involving any public offering within the meaning
of the Securities Act, and (y) that (A) if within three years (or such
shorter period as may then be applicable under the Securities Act regarding
the holding period for securities under Rule 144(k) of the Securities Act
or any successor rule) after the date of original issuance of the Shares or
if within three months after it ceases to be an affiliate (within the
meaning of Rule 144 under the Securities Act) of the Company, it decides to
resell, pledge or otherwise transfer such Shares on which the applicable
legend set forth below appears, such Shares may be resold, pledge or
transferred only (i) to the Company, (ii) so long as such Shares are
eligible for resale pursuant to Rule 144A, to a person who the transferor
reasonably believes is a Qualified Institutional Buyer that purchases for
its own account or for the account of a Qualified Institutional Buyer to
whom notice is given that the resale, pledge or transfer is being made in
reliance on Rule 144A (as indicated by the box checked by the transferor on
the Certificate of Transfer on the reverse of the certificate representing
the Shares if such Shares are not in book-entry form), (iii) in an offshore
transaction in accordance with Regulation S (as indicated by the box
checked by the transferor on the Certificate of Transfer on the reverse of
the certificate representing the Shares if such Shares are not in book-
entry form), and if such transfer is being effected pursuant to this clause
(iii) prior to the expiration of the "one year restricted period" (within
the meaning of Rule 903 (c)(3) of Regulation S), the transferee shall have
certified to the Company and the Transfer Agent that such transferee is a
non-U.S. Person (within the meaning of Regulation S) and that such
transferee is acquiring the Shares in an offshore transaction (within the
meaning of Regulation S), (iv) to an institutional Accredited Investor
(as indicated by the box checked by the transferor on the Certificate of
Transfer on the reverse of the certificate representing the Shares if such
Shares are not in book-entry form) who has certified to the Company and the
Transfer Agent that such transferee is an institutional Accredited Investor
and is acquiring the Shares for investment purposes and not for
distribution (provided that no Purchaser who has purchased Shares from any
▇▇▇. ▇-▇
person other than a Qualified Institutional Buyer or an institutional
Accredited Investor pursuant to clause (iii) shall be permitted to transfer
any Shares so purchased by it to an Institutional Accredited Investor
pursuant to this clause (iv) prior to the expiration of the "one year
restricted period" (within the meaning of Rule 903(c)(3) of Regulation
S )), (v) pursuant to an exemption from registration under the Securities
Act provided by Rule 144 (if applicable) under the Securities Act, or (vi)
pursuant to an effective registration statement under the Securities Act in
each case in accordance with any applicable securities laws of any state of
the United States or other jurisdictions; (B) the purchaser will, and each
subsequent holder is required to, notify any purchaser of Shares from it of
the resale restrictions referred to in (A) above, if then applicable; and
(C) with respect to any transfer of Shares pursuant to clauses (A)(iii),
(iv) or (v) above, such holder and the transferee will deliver to the
Company and the Transfer Agent certificates which may be obtained from the
Company and such other certificates and other information, including an
opinion of counsel, as they may reasonably require to confirm that the
transfer by it to the transferee complies with the foregoing restrictions;
4. it understands that the notification requirements referred to in
3. above will be satisfied by virtue of the fact that the following legend
will be placed on the certificates representing the Shares unless otherwise
agreed by the Company:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS SECURITY MAY
NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE THIRD
ANNIVERSARY (OR SUCH SHORTER PERIOD AS MAY THEN BE APPLICABLE UNDER THE
SECURITIES ACT) OF THE ISSUANCE HEREOF (OR OF ANY PREDECESSOR SECURITY
HERETO) OR (Y) BY ANY HOLDER THAT WAS AN AFFILIATE OF THE COMPANY AT ANY
TIME DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER
CASE OTHER THAN (1) TO THE COMPANY, (2) SO LONG AS THIS SECURITY IS
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE
144A"), TO A PERSON WHOM THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON
THE CERTIFICATE OF TRANSFER ON THIS SECURITY), (3) IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT (AS
INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF
TRANSFER ON THIS SECURITY), AND, IF SUCH TRANSFER IS BEING EFFECTED PRIOR
TO THE EXPIRATION
Exh. D-3
OF THE "ONE YEAR RESTRICTED PERIOD" (WITHIN THE MEANING OF RULE 903(c)(3)
OF REGULATION S UNDER THE SECURITIES ACT), A CERTIFICATE WHICH MAY BE
OBTAINED FROM THE COMPANY IS DELIVERED BY THE TRANSFEREE TO THE COMPANY AND
THE TRANSFER AGENT, (4) TO AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR"
AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT (AS
INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF
TRANSFER ON THIS SECURITY) THAT IS ACQUIRING THIS SECURITY FOR INVESTMENT
PURPOSES AND NOT FOR DISTRIBUTION (PROVIDED THAT NO PURCHASER WHO HAS
PURCHASED SHARES FROM ANY PERSON OTHER THAN A QUALIFIED INSTITUTIONAL BUYER
OR AN INSTITUTIONAL ACCREDITED INVESTOR PURSUANT TO CLAUSE (3) SHALL BE
PERMITTED TO TRANSFER ANY SHARES SO PURCHASED BY IT TO AN INSTITUTIONAL
ACCREDITED INVESTOR PURSUANT TO THIS CLAUSE (4) PRIOR TO THE EXPIRATION OF
THE "ONE-YEAR RESTRICTED PERIOD" (WITHIN THE MEANING OF RULE 903(c)(3) OF
REGULATION S)), (5) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES
ACT, OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR OTHER JURISDICTIONS; AND (B) IT
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM
IT OF THIS SECURITY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
WITH RESPECT TO ANY TRANSFER OF SECURITIES PURSUANT TO CLAUSES (A)(3), (4)
AND (5) ABOVE, THE HOLDER OF THIS SECURITY AGREES THAT IT AND THE
TRANSFEREE WILL FURNISH TO THE COMPANY AND THE TRANSFER AGENT CERTIFICATES
IN THE RESPECTIVE FORMS ATTACHED TO THIS CERTIFICATE AND SUCH OTHER
CERTIFICATES AND OTHER INFORMATION, INCLUDING AN OPINION OF COUNSEL, AS
THEY MAY REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT TO THE
TRANSFEREE OF THIS SECURITY COMPLIES WITH THE FOREGOING RESTRICTIONS. THE
HOLDER HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE
BENEFIT OF THE TRANSFEROR THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A OR (2) AN INSTITUTION THAT IS AN
"ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER
THE SECURITIES ACT AND THAT IT IS HOLDING THIS SECURITY FOR INVESTMENT
PURPOSES AND NOT FOR DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE
UNITED STATES WITHIN THE MEANING OF (OR ANY ACCOUNT SATISFYING THE
REQUIREMENTS OF PARAGRAPH (o)(2) OF RULE 901 UNDER) REGULATION S UNDER THE
SECURITIES ACT";
Exh. D-4
5. it understands that the Company, the Initial Purchaser and others
will rely upon the truth and accuracy of the foregoing acknowledgments,
representations, warranties and agreements and agrees that if any of the
acknowledgments, representations, warranties and agreements deemed to have
been made by it by its purchase of the Shares are no longer accurate, it
shall promptly notify the Company and the Initial Purchaser. If it is
acquiring the Shares as a fiduciary or agent for one or more investor
accounts, it represents that it has sole investment discretion with respect
to each such account and it has full power to make the foregoing
acknowledgments, representations, warranties and agreements on behalf of
each such account;
6. if it is a purchaser in a sale that occurs outside the United
States within the meaning of Regulation S under the Securities Act, it
acknowledges that until the expiration of the "one year restricted period"
within the meaning of Rule 903 of Regulation S under the Securities Act,
any offer or sale of the Shares shall not be made by it within the United
States or to, or for the account or benefit of, a U.S. person within the
meaning of Rule 902(o) of the Securities Act; and
7. it understands that the sale of Shares to Plans is in no respect a
representation by the Company, the Initial Purchaser or any other person
associated with the sale of the Shares that such Shares meet all relevant
legal requirements with respect to investments by Plans generally or any
particular Plan, or that such Shares are otherwise appropriate for Plans
generally or any particular Plan.
Exh. D-5
EXHIBIT E
FORM OF OPINION OF COUNSEL TO THE COMPANY
[Letterhead of ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP]
Date
Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc.
Potomac Tower
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
We have acted as counsel to Annaly Mortgage Management, Inc., a Maryland
corporation (the "Company"), in connection with the preparation of a preliminary
offering memorandum, dated January 27, 1997 (the "Preliminary Memorandum"), and
a final offering memorandum, dated February 12, 1997 (the "Final Memorandum"),
relating to the sale by the Company to you (the "Initial Purchaser") of
3,600,000 shares (the "Shares") of its common stock, par value $.01 per share
(the "Common Stock").
The Shares are being sold pursuant to a Purchase Agreement, dated February 12,
1997 (the "Purchase Agreement"), between the Company and the Initial Purchaser.
In connection with rendering the opinions expressed herein, we have examined,
among other things, copies of (i) the Articles of Incorporation and the Articles
of Amendment and Restatement of the Company, each as amended to date, (ii) the
by-laws of the Company, as amended to date, (iii) the Preliminary Memorandum,
(iv) the Final Memorandum, (v) the Purchase Agreement and (vi) the Registration
Rights Agreement, dated February 12, 1997, between the Company and the Initial
Purchaser (the "Registration Rights Agreement").
We have also examined originals, or copies satisfactory to us, of all such
corporate records, agreements, certificates, governmental orders, permits and
other documents as we have deemed relevant and necessary as a basis for the
opinions hereinafter expressed. In such examination we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity with the original documents of all documents
submitted to us as copies. As to any facts material to such opinions (including
determinations with respect to the question of materiality to the Company's
business), we have relied, among other things, upon the representations and
warranties of the Company and the Initial Purchaser in the Purchase
Exh. E-1
Agreement, certificates of public officials and certificates of officers or
other representatives of the Company.
We have participated in conferences with representatives of the Company,
representatives of the independent auditors of the Company and representatives
of the Initial Purchaser, at which conferences the contents of the Preliminary
Memorandum and the Final Memorandum were discussed and, although we have not
established or confirmed factual matters and are not passing upon and do not
assume any responsibility for the factual accuracy or completeness of the
Preliminary Memorandum or the Final Memorandum, on the basis of the foregoing
nothing has come to our attention to cause us to believe that the Preliminary
Memorandum, as of its date, or the Final Memorandum, as of the date hereof
(except for financial statements and schedules and other financial and
statistical data included therein, as to which we state no belief) contained or
contains any untrue statement of a material fact or omitted or omits to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
The opinions expressed below are limited to the laws of the State of New York,
United States Federal law and the Maryland General Corporation Law, except to
the extent provided in paragraph 2 of this opinion letter. The opinion
expressed in paragraph 1 is based solely upon our review of a Certificate of
Good Standing from the State Department of Assessments and Taxation of the State
of Maryland. The opinion in the first sentence of paragraph 2 is bases solely
upon our review of a Certificate of Existence from the New Jersey Department of
State. The opinions expressed below are also subject to the qualifications that
we have assumed the due authorization, execution and delivery by each party
thereto other than the Company of the Purchase Agreement and the Registration
Rights Agreement (collectively, the "Agreements"), the legal right and power of
each such party under all applicable laws and regulations to execute, deliver
and perform its obligations under the Agreements, and the validity, binding
effect and enforceability of the Agreements against such persons in accordance
with the terms thereof. Whenever our opinion with respect to the existence or
absence of facts is indicated to be based on our knowledge, we are referring
only to the actual knowledge (after such inquiry as we have considered
appropriate) of those of our attorneys who have represented the Company in
connection with the transactions contemplated by the Agreements.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Maryland.
2. The Company is authorized to transact business as a foreign corporation in
the State of New Jersey and such authorization is in full force and effect. We
are not aware of any other state in which the Company is required to be
qualified to transact business as a foreign corporation and in which the failure
to be so qualified would have a material adverse effect.
Exh. E-2
3. The Company has the corporate power to own or lease its properties and
conduct is business as described in the Final Memorandum, and the Company has
the corporate power to enter into the Agreements and to carry out the terms and
provisions thereof to be carried out by it.
4. To our knowledge, the Company has no subsidiaries and does not own,
directly or indirectly, any shares of stock or other equity securities of any
corporation or any equity interest in any firm, partnership, join venture,
association or other entity.
5. All of the issued shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and nonassessable, and were not
issued in violation of or subject to any statutory preemptive rights or, to our
knowledge, other preemptive rights or other rights to subscribe for or purchase
securities; the Shares have been duly authorized by all necessary corporate
action of the Company and, when issued, paid for and delivered pursuant to the
Purchase Agreement, will be validly issued, fully paid and nonassessable; no
holders of outstanding shares of capital stock of the Company are entitled as
such to any statutory preemptive rights or, to our knowledge, other preemptive
or other rights to subscribe for any of the Shares; and, to our knowledge, no
holders of securities of the Company are entitled to have such securities
registered under the Securities Act of 1933, as amended (the "Securities Act"),
other than pursuant to the Registration Rights Agreement.
6. The statements set forth under the headings "Description of Capital Stock,"
"ERISA Consideration" and "Certain Federal Income Tax Considerations" in the
Final Memorandum, insofar as such statements constitute matters of law,
summaries of legal matters, documents or proceedings, or legal conclusions, have
been reviewed by us and are accurate in all material respects.
7. The execution and delivery of the Agreements have been duly and validly
authorized by all necessary corporate action of the Company, the Agreements have
been duly executed and delivered by the Company, and each Agreement (except as
to those provisions relating to indemnity or contribution for liabilities
arising under the Securities Act as to which we express no opinion) is the valid
and binding agreement of the Company, enforceable against the Company in
accordance with its respective terms.
8. To our knowledge, (a) no legal or govenmental proceedings are pending to
which the Company is a party or to which the property of the Company is subject
and (b) no such proceedings are threatened against the Company or with respect
to any of its properties.
9. No consent, approval, authorization or order of any court or governmental
agency or body is required for the consummation by the Company of the
transactions contemplated by the Agreements, except for such consents,
approvals, authorizations or orders as have been obtained, the registration
statement to be filed pursuant to the Registration Rights Agreement which, in
accordance with the terms thereof, must be declared effective by the Securities
and Exchange
Exh. E-3
Commission, and such consents, approvals, authorizations or orders as may be
required under the blue sky laws of any jurisdiction in conneciton with the
purchase and resale of the Shares by the Initial Purchaser.
10. Neither the issue and sale of the Shares, the execution and delivery of the
Agreements, nor the consummation of any of the transactions therein nor the
fulfillment of the terms thereof will conflict with, result in a breach or
violaiton of, or constitute a default under any law or the articles of
incorporation or by-laws of the Company or the terms of any Material Agreement
to which the Company is a party or by which the Company or any of its properties
is bound, or any statute or any judgment, order, rule or regulation of any
court, regulatory body, administrative agency, governmental body or arbitrator
having jurisdiction over the Company. For purposes of our opinion, "Material
Agreement" means any indenture, credit agreement, mortgage, deed of trust, lease
or other material agreement or instrument identified on Schedule A which the
----------
Company has certified to us, and to our knowledge are the only indentures,
credit agreemetns, mortgages, deeds of trust, leases or other material
agreemetns or instruments to which the Company is a party or by which the
Company or any of its properties is bound.
11. It is not necessary in connection with the offer, sale and delivery of the
Shares in the manner contemplated by the Purchase Agreement, the Preliminary
Memorandum and the Final Memorandum to register the Shares under the Securities
Act, except as is contemplated by the Registration Rights Agreement.
12. Assuming that at all times either (a)(i) the Company's outstanding
securities (other than short-term paper) are beneficially owned by not more than
100 persons within the meaning of Section 3(c)(1) of the Investment Company Act
of 1940, as amended ("1940 Act"), and (ii) the Company is not making and does
not at any such time propose to make, a public offering of its securities, or
(b)(i) the Company is not engaged in the business of issuing redeemable
securities, face-amount certificates of the installment type or periodic payment
plan certificates, and (ii) the Company is primarily engaged in the business of
purchasing or otherwise acquiring mortgages and other liens on and interests in
real estate within the meaning of Section 3(c)(5)(C) of the 1940 Act, the
Company is not, and the transactions contemplated by the Purchase Agreement will
not cause the Company to become, an "investment company" under the 1940 Act. We
note for your information that there are other available exceptions under the
1940 Act from the definition of "investment company" thereunder.
13. The specimen stock certificate of the Company is in due and proper form
under Maryland law to evidence shares of the Common Stock, has been duly
authorized and approved by the Board of Directors of the Company and complies
with all legal requirements; and the Common Stock conforms in all material
respects to the description contained in the Final Memorandum.
14. To our knowledge, the Company is not in violation of its articles of
incorporation or by-laws or other organizational documents or in breach of or
default under any provision of any Material Agreement, except where such default
would not have a Material Adverse Effect.
Exh. E-4
15. Commencing with the Company's taxable year ending December 31, 1997, and
assuming the Company operates in the manner described in the Final Memorandum
and in all respects in accordance with the representations, warranties and
agreements set forth in a certificate of the Company addressed to us dated the
date hereof, a copy of which is attached as Exhibit A hereto, the Company will
---------
be organized in conformity with the requirements for qualification as a REIT
under the Code (as defined in the Purchase Agreement), and the Company's
proposed method of operation will enable it to meet the requirements for
qualification and taxation as a REIT under the Code.
16. Assuming that the Company does not solicit, accept or receive from others
funds, securities or property, either directly or through capital contributions,
the sale of stock or otherwise, for the purpose of trading in any commodity (as
defined in the Commodity Exchange Act, as amended (the "Commodity Act")) for
future delivery on or subject to the rules of any contract market (as defined in
the Commodity Act), the Company is not required to be registered as a commodity
pool operator under the Commodity Act.
Our opinon in paragraph 7 is subject to (i) applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or similar laws affecting the
enforcement of creditors' rights generally, (ii) certain laws and judicial
decisions relating to certian rights or remedies which, among other things, may
affect the availability of the remedies provided in the Agreements, and (iii)
general equitable principles (whether condsidered in a proceeding in equity or
at law).
In connection with our opinion set forth in paragraph 11 above, we have assumed
(i) that the offer, issuance, sale and delivery of the Shares to you and the
reoffer, resale and delivery thereof to subsequent purchasers have been
conducted solely in the mangger contemplated by the Preliminary Memorandum, the
Final Memorandum and the Purchase Agreement, (ii) the accuracy of the
representations and confirmations contained in the Preliminary Memorandum, the
Final Memorandum, the Purchase Agreement and the Investor Letters referred to
below, (iii) that each offer and sale of Shares made in reliance on Regulation S
has been and will be made in an offshore transaction (as defined in Regulation
S) and to a person who is not a U.S. person (as defined in Regulation S) or a
person acquiring the securities for the account or benefit of any U.S. person
who has exeucted and delivered to the Initial Purchaser and the Company and
Investor Letter in the form of Exhibit C to the Purchase Agreement, (iv) that
each offer and sale of Shares made in reliance on Rule 144A has been and will be
made to a Qualified Institutional Buyer (as defined in Rule 144A under the
Securities Act) which has been made aware that the seller of the Shares may rely
on the exemption from registration provided under Rule 144A, which has been
provided with the information described in Rule 144A(d)(4) under the Securities
Act, and which has executed a certificate in the form of Exhibit A to the
Purchase Agreement, and (v) that each offer and sale of Shares to institutional
accredited investors has been and will be made to a person with whom the Initial
Purchaser has a preexisting relationship as a result of which the Initial
Purchaser has reason to believe that such person has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of
Exh. E-5
an investment in the Shares, and that each such institutional accredited
investor has executed and delivered to the Company and Investor Letter in form
of Exhibit B to the Purchase Agreement.
This opinion is furnished by us at your request for your sole benefit and this
opinion is not to be used, circulated, quoted or otherwise referred to for any
other purpose. No other person or entity shall be entitled to rely on this
opinon without our express written consent. This opinon shall not be published
or reproduced in any manner or distributed or circulated to any person or entity
without our express written consent. Our opinion is limited to the matters
stated herein, and no opinion is implied or may be inferred beyond the matters
expressly stated herein.
Very truly yours,
Exh. E-6